Judge Calls CFTC-Kalshi Deal "Collusive" as Novig Loses NY Injunction

Judge McMahon of the U.S. District Court for the Southern District of New York denied Novig's request for a preliminary injunction against Attorney General Letitia James and the New York Gaming Commission in a 35-page opinion filed Nov. 10. Novig sued in August claiming the Commodity Exchange Act hands the CFTC sole jurisdiction over its contracts. McMahon found Novig unlikely to win on the merits and never reached the other injunction factors.

"The Court is not required to disregard common sense—Novig's sports event contracts are sports betting," she wrote, quoting the company's own pitch: "Our north star is to be the largest sports betting platform in the world." A footnote jabbed that Novig earns money "by charging two suckers a fee for the privilege of betting against each other on its platform." She called Novig's claim it can't obey both state and federal law "ridiculous," noting it could get a New York license the way it briefly held a Colorado one in 2023.

The CFTC took the hardest hit. McMahon said the agency's August emergency order letting Kalshi keep operating after New York sued "smacks of a collusive effort between a regulator and regulatee to generate a claim for conflict preemption." That order followed Kalshi's own Aug. 1 warning of a "market emergency" and an "existential threat" to the Commission's registrants. Since the CFTC's current rules bar gaming-related event contracts, McMahon said the supposed conflict is "a mirage."

She also went after two Oct. 19 CFTC rulemakings — one proposing to define sports, politics, culture and weather contracts as swaps, the other an interim final rule saying sportsbook and casino bets aren't. McMahon called them "inherently contradictory," saying who sits on the other side of a bet "is simply not a difference that makes a difference," and that the shift "appears calculated to influence the outcome of the ongoing litigation on this very issue."

Federal appeals courts are already split. The Third Circuit backed Kalshi against New Jersey in April, the Ninth Circuit found the contracts' "substance" was "sports gambling" in August, and the Sixth Circuit followed in September. New Jersey has asked the Supreme Court to review, with amicus support from Ohio and 38 other states plus D.C., the NFL, the American Gaming Association and 145 tribes. Kalshi's response is due Dec. 7 after two extensions.

Novig lodged a notice of interlocutory appeal within hours. The Second Circuit is already weighing the same questions in consolidated appeals from Kalshi and Coinbase, where a motions panel denied injunctions pending appeal in a non-precedential order and a merits panel hasn't heard argument. Novig is also fighting elsewhere: on Nov. 9, Missouri's attorney general counterclaimed against it under a federal anti-gambling law in a suit Novig brought in St. Louis.